Item 5: Fees and Compensation
HCM offers advisory services for a fee based upon assets under the Firm’s management. HCM offers
financial planning services based upon fixed and/or hourly fees. Additionally, certain of HCM’s Supervised
Persons, in their individual capacities, may offer securities brokerage services and insurance products under
a separate commission-based arrangement.
Investment Management Fees
For traditional investment management engagements, HCM generally charges an annual asset-based fee
(the “Advisory Fee”) in accordance with the following blended fee schedule:
Total Assets Annual Fee
First $1,000,000 1.00%
Next $2,000,000 0.75%
Next $2,000,000 0.50%
Above $5,000,000 0.25%
The Advisory Fee is prorated and charged quarterly in advance, based upon the market value of the assets
being managed by HCM on the last day of the previous quarter.
In addition, for accounts managed pursuant to the Firm’s enhanced tactical allocation strategies, as
described in Item 8, HCM charges a separate quarterly fee of 0.25% (the “Management Fee”) in addition
to the standard Advisory Fee set forth above. This Management Fee is charged quarterly in arrears, based
upon the market value of the account on the last day of the previous quarter. This additional layer of fees
is attributable to certain third-party research, trading expenses and additional management oversight
associated with the underlying strategy, which are incurred directly by the Firm. Clients are advised that
this fee arrangement presents a potential conflict of interest in that there exists a financial incentive for
HCM to direct assets to the enhanced tactical allocation.
For the initial term of an engagement, fees are calculated on a pro rata basis. If assets are deposited into or
withdrawn from an account after the inception of a billing period, the fees payable with respect to such
assets are not adjusted to reflect the interim change in portfolio value. In the event the Agreement is
terminated, the fees for the final billing period are prorated through the effective date of the termination.
HCM’s annual fee is exclusive of and in addition to brokerage commissions, transaction fees, and other
related costs and expenses which are incurred by the client. HCM does not, however, receive any portion
of these commissions, fees and costs. There may be a minimum fee to be disclosed in the advisory contract
with the client. This minimum fee in certain circumstances may exceed the stated advisory fee of the
contract.
Financial Planning Fees
HCM may charge a fixed fee and/or hourly fee to provide clients with stand-alone financial planning
services. These fees are largely determined by the scope and complexity of the agreed upon services, but
generally range from $2,250 to $4,500 on a fixed fee basis and up to $150 on an hourly fee basis.
The specific terms and fee structure are negotiated in advance and set forth in an engagement letter with
HCM. Generally, HCM requires one-half of the financial planning or consulting fee payable upon
execution of the engagement letter and the balance due at the time the financial plan is delivered or the
underlying services are rendered to completion. Depending on the arrangement, if the client engages HCM
for additional investment advisory services, HCM may offset all or a portion of its fees for those services
based upon the amount paid for the financial planning services.
Fee Discretion
HCM, in its sole discretion, may negotiate to charge a lesser fee based upon certain criteria, such as a
client’s association with a preferred affinity group, anticipated future earning capacity, anticipated future
additional assets, dollar amount of assets to be managed, related accounts, account composition, preexisting
client relationship, account retention and pro bono activities.
Additional Fees and Expenses
In addition to the fee paid to HCM, clients may also incur certain charges imposed by other third parties,
such as broker-dealers, Independent Managers, custodians, trust companies, banks and other financial
institutions (collectively “Financial Institutions”). These additional charges may include securities
brokerage commissions, transaction fees, custodial fees, charges imposed directly by a mutual fund or ETF
in a client’s account, as disclosed in the fund’s prospectus (e.g., fund management fees and other fund
expenses), deferred sales charges, odd-lot differentials, transfer taxes, wire transfer and electronic fund fees,
and other fees and taxes on brokerage accounts and securities transactions.
Fee Debit
The Firm’s Agreement and the separate agreement with any Financial Institutions generally authorize HCM
to debit its clients’ accounts for the amount of the advisory/management fees and to directly remit those
fees to HCM. Any Financial Institutions recommended by HCM have agreed to send statements to clients
not less than quarterly indicating all amounts disbursed from the account, including the amount paid directly
to HCM. Alternatively, clients may, in certain circumstances, request to have HCM send them an invoice
for direct payment.
Account Additions and Withdrawals
Clients may make additions to and withdrawals from their account at any time, subject to HCM’s right to
terminate an account. Additions may be in cash or securities provided that the Firm reserves the right to
liquidate any transferred securities or decline to accept particular securities into a client’s account. Clients
may withdraw account assets on notice to HCM, subject to the usual and customary securities settlement
...